Oil pruces rose on Monday, with Brent crude topping $113 a barrel, as outages in Libya deepened concern over tight global supply and the Ukraine crisis dragged on, offsetting concern over slowing Chinese demand.
Adding to supply pressures from sanctions on Russia, Libya’s National Oil Corp warned that, “a painful wave of closures” had begun hitting its facilities and declared force majeure at Al-Sharara oilfield and other sites.
“With global supplies now so tight, even the most minor disruption is likely to have an outsized impact on prices,” said Jeffrey Halley, an analyst at brokerage OANDA.
Brent crude, the global benchmark, rose $1.37, or 1.2 per cent, to $113.07 at 1332 GMT, not far from the highest since March 30 of $113.80 hit earlier in the session. United States West Texas Intermediate gained $1.48, or 1.4 per cent, to $108.43.
The Libyan developments offset concern about demand in China, where the economy slowed in March, taking the shine off first-quarter growth numbers and worsening an outlook already weakened by COVID-19 curbs.
“Some Asian investors booked profits as they became worried about slowing demand in China,” said Satoru Yoshida, a commodity analyst with Rakuten Securities.
Data showed China refined two per cent less oil in March than a year earlier, with throughput falling to the lowest since October as the surge in crude prices squeezed margins and tight lockdowns hurt demand.
In March, oil surged to the highest since 2008, with Brent briefly topping $134.
The Associated Press reported that there were concerns of deeper supply losses looming as Russian production declined by 7.5 per cent in the first half of April from March and EU governments said last week the bloc’s executive was drafting proposals to ban Russian crude.
Those comments came before an escalation in the Ukraine war. Ukrainian authorities said missiles struck Lviv early on Monday and explosions rocked other cities as Russian forces kept up their bombardments after claiming near full control of the port of Mariupol.
Authorities claimed tribal leaders in southern Libya had shut down the county’s largest oil field — the latest closure of an oil facility amid a bitter standoff between two rival governments.
Oil production at the Sharara field has been stopped and the state-run National Oil Corporation declared force majeure at the field, which produced around 450,000 barrels a day.
Force majeure is a legal manoeuvre that enables a company to get out of its contractual obligations because of extraordinary circumstances.
The corporation called the shutdown of the field an “absurd move” that mirrored the ongoing standoff in the country. The closure would likely create a fuel crisis in the oil-rich country, as the field was one of the main sources of domestic fuel.
The corporation did not name those people behind the closure, but its announcement came a few hours after tribal leaders in the desert town of Ubari, about 950 kilometres (590 miles) south of the capital, Tripoli, said they shut down the field in protest against the government of embattled Prime Minister Abdul Hamid Dbeibah.
They called for Tripoli-based Dbeibah to hand over power to the government of Prime Minister Fathi Bashagha, who was appointed by the parliament in February to lead a transitional administration after Libya failed to hold its first presidential election in December.
Local media also reported that residents in the south-eastern district of Whahat announced the closure of all oil facilities in their area, also to pressure Dbeibah to step aside.
Over the weekend, tribal leaders and protesters shut down the al-Feel field and the Zueitina terminal on the Gulf of Sirte, forcing the national oil company to declare force majeure at the two facilities.
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